Companies want looser regs for IPOs

SAN FRANCISCO — When President Barack Obama visits the Silicon Valley headquarters of Facebook later this month, he may come bearing gifts.

One might be the loosening of regulations on private companies seeking to raise money. It is something Silicon Valley has pined for, with hot companies such as Twitter, Facebook and Zynga hoping to tap the public market without triggering what they consider burdensome regulatory oversight for public companies.

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Last week, Securities and Exchange Commission Chairman Mary Schapiro revealed she had ordered a review of all the rules affecting capital formation for small companies and is reconsidering current restrictions on communications in IPOs.

At a talk Friday in Dallas, Schapiro said the rules “governing the offering process are decades old” and it makes sense to review whether they “have kept pace with changing market dynamics.”

Investors applauded the SEC’s review and the possibility it could open up the market further. House Oversight and Government Reform Chairman Darrell Issa (R-Calif.), who had sent a letter to Schapiro last month attacking the SEC’s regulations, said Schapiro’s steps do not go far enough.

One former SEC investigator said the SEC should proceed cautiously. “We should look at efforts to deregulate IPOs with some historical sense of what is going on here,” said Gary Aguirre, now a securities lawyer with the Aguirre Law Firm. “Didn’t we just see what happened with the deregulation of credit default swaps, something that nearly ate us alive?”

“Now we are looking at a little baby,” he said. “Well, it’s Facebook. But it’s not just Facebook. We will create a new environment for IPOs that are nothing but gas. It’s like we don’t learn.”

The debate comes as the White House has struggled with how to present the president to the business community. Obama has played tough cop on the business beat in the wake of the financial crisis and cheerleader for innovation, job creation and the Sputnik moment as he travels the country. Bringing in Bill Daley, a former JPMorgan Chase & Co. executive, as White House chief of staff was widely viewed as an effort to appease business.

Meanwhile, Republicans, now with control of the House, are better positioned to hit the White House on the jobs issue, push for changes to regulations and put more pressure on regulatory agencies.

“There’s such a focus on the issue of jobs,” said Chris Lehane, a political consultant who was press secretary for Al Gore’s 2000 presidential campaign. “It’s created an opportunity to say that some laws are pro-jobs, some are anti-jobs.”

The administration’s position is to open up the discussion about regulations but not to appear to give away key protections, he said. “It’s the irony of it. You have people beating up on public pensions at the same time people are talking about taking a look at unwinding rules that were created as a result of the Great Depression.”

“We are encouraged that the SEC is re-evaluating their rules in an effort to stimulate the capital markets while still recognizing investor protection,” Mark Murphy, head of public affairs at SecondMarket, said in a statement.